MEMORANDUM REGARDING COMMUNIQUE ON SUPPORTING CONVERSION TO TURKISH LIRA DEPOSIT AND PARTICIPATION ACCOUNTS

In this memorandum, the Communique on Supporting the Conversion to Turkish Lira Deposit and Participation Accounts (No: 2021/14) (“Communique”), which was published in the Official Gazette (Repeated) dated 21.12.2021 and numbered 31696, will be examined.

The said Communique regulates the procedures and principles regarding the support to be provided to deposit and participation fund holders in the event that deposit accounts and participation funds in foreign currency are converted into Turkish Lira deposit and participation accounts.The support to be provided within the scope of the Communique is as follows step by step:

· Pursuant to the Communique, deposit and participation fund accounts of real persons residing in Turkey, which are in US dollar, Euro and British Pound and present on 20.12.2021, are converted into Turkish Lira at the conversion rate if the account holder requests it. The conversion rate has been determined as the foreign exchange buying rate announced by the Central Bank at 11:00 on the trading day.

· Subsequently, the foreign currency obtained by the bank from this transaction is purchased by the Central Bank at the conversion rate, and the corresponding Turkish Lira is transferred to the relevant bank.

· A Turkish Lira deposit or participation account with a maturity of 3 months, 6 months or 1 year is opened by the bank. The interest rate to be applied by the bank to the deposit account cannot be below the one-week repo auction interest rate determined by the Central Bank. In case the yield to be provided to participation accounts is lower than the cost incurred in one-week repo transactions made by participation banks with the Central Bank within the scope of open market operations, the participation bank covers the difference unilaterally.

· At the end of maturity, the bank pays the principal and interest or dividend to the holder of a Turkish lira deposit or participation account.

· If the exchange rate at the end of the maturity is higher than the conversion rate and the amount calculated over the exchange rate difference is higher than the interest or profit share to be paid by the bank, the amount calculated by deducting the interest or profit share from the amount calculated over the exchange rate difference is transferred by the Central Bank to the relevant bank to be paid to the deposit or participation account holder.

With this application, the Central Bank has undertaken to cover the loss of profit that may occur due to the increasing exchange rate during the maturity period, by encouraging the transition to a Turkish Lira deposit or participation account.

It should be noted that after the conversion, if the account holder withraws money from Turkish Lira deposit or participation account before the maturity date, the support provided under the Communique will not be available. Pursuant the Communique, the account holders may utilise this support only once.

If you have any questions or problems about the subject, please do not hesitate to contact our office.

27/12/2021

Respectfully submitted,

Yüksel / Yerkel & Partners Law Office